First-Time Business Owners And Bankruptcy: What The Laws Say About Starting Another Business

As you begin the bankruptcy process for your first-ever entrepreneurial attempt, you may be wondering if it is possible to start over. You may also be wondering if filing for bankruptcy for your first business will affect how you start another business. Those are all legitimate concerns, given that credit is an important factor for financing your endeavors. The following will enlighten you as to how so many people have managed to start new businesses when their old businesses ended up in bankruptcy.

TIN and EIN and Their Impact on Opening a New Business

Usually when you apply for a bank loan to start a business, the bank wants you to have a TIN (Tax Identification Number) or EIN (Employer Identification Number). Either one of these two numbers is used in place of your personal social security number when you apply for business capital through a lender or creditor. During a bankruptcy process, all of the business debt that you are attempting to eliminate is directly tied to that TIN or EIN. The bankruptcy appears on a credit report separate from your personal report, which means that if you apply for a new EIN or TIN through the federal bureau, your prior bankruptcy will not appear on record for the new business that you intend to open and operate.

Obtaining More Credit or Loans

While it is definitely not advisable for you to jump right back into debt to start another business so soon after filing for bankruptcy, it does not mean you cannot. However, if you attempt to apply for loans through the same sources you used to start your previous business, there is a very high probability that you will be refused. Most banks you have already done business with will have your information on file and recognize you as someone who did not pay off your previous loans.

Different lenders who have no previous experience or knowledge of your bankruptcy and the loss of your business may be able to track down your court records if you give them permission, which can affect your ability to get a loan. Creditors are also less likely to help, so you will have to find an alternative way to fund your new business venture or just wait the seven to ten years when your business's bankruptcy falls off the records. Your bankruptcy lawyer would recommend that you take some time off to evaluate what caused your first business to go belly up, and then reassess your financial situation to see if you can support a second attempt at an entrepreneurial adventure.

If you have any questions, consider visiting a bankruptcy lawyer such as Law Office of Michael Alfano.